The value of information under ambiguity: a theoretical and experimental study on pest management in agriculture

Stéphane Couture, Stéphane Lemarié (), Sabrina Teyssier and Pascal Toquebeuf
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Stéphane Lemarié: GAEL - Laboratoire d'Economie Appliquée de Grenoble - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes
Sabrina Teyssier: GAEL - Laboratoire d'Economie Appliquée de Grenoble - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes
Pascal Toquebeuf: GAEL - Laboratoire d'Economie Appliquée de Grenoble - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes

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Abstract: This article addresses the value of information that affects the ambiguity faced by a decision maker. Our analysis is applied to the case of a farmer whose production can be damaged by a pest attack with unknown probability, this damage being reduced if the farmer decides to use a pesticide. Early warning systems have precisely been implemented in many countries to help farmers avoid inappropriate decisions in terms of pesticide use. We investigate, both theoretically and experimentally, how farmers value these systems. We propose a two-state self-insurance model in which an alpha-MaxMin Expected Utility farmer may use pesticides that reduce the loss in the accident state while incurring a cost in both states. Her decision to self-insure or not depends on risk and ambiguity attitudes. We compile and compare the value of two types of information leading to a reduction of ambiguity and analyze their properties with respect to ambiguity attitude. Both types of information are valued positively if the farmer is ambiguity averse. We conduct a framed field experiment in which farmers and agricultural students have to decide whether or not to apply pesticides depending on risk, ambiguity and the associated monetary gains resulting from pesticide cost. The experimental findings support the theory. The average value of information among all participants is between (sic)0.9/ha and (sic)3.3/ha depending on the information gain.

Keywords: Early warning systems; Ambiguity aversion; Risk aversion; Self- insurance; Pesticide use; Value of information (search for similar items in EconPapers)
Date: 2023-06-20
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Citations: View citations in EconPapers (1)

Published in Theory and Decision, 2023, 96 (1), pp.19-47. ⟨10.1007/s11238-023-09942-y⟩

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Journal Article: The value of information under ambiguity: a theoretical and experimental study on pest management in agriculture (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04553780

DOI: 10.1007/s11238-023-09942-y

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